Panama Pacific Agency. Substance Requirements Provision Amendment.

On October 13^th, 2020 the Board of Directors Resolution No. 006-2020 was published in the Official Gazette, amending point 5.1 of Article 1 of the Board of Directors Resolution No. 005-2020, which adopted the guidelines for applying the substance requirements established by articles 60-A and 60-B of Law No. 41 of 2004 – which established a Panama Pacific Economic Zone Special Regime and created the Panama-Pacific Regulatory Agency –  and by the Board of Directors Resolution No. 004-2020.

Point 5 of Article 1 of the Board of Directors Resolution No. 005-2020, establishes the Substance Requirements Compliance Parameters, and it provides that profits an income obtained by the entities for the execution of activities subject to substance requirements, shall be granted a one-period income tax incentive included in Law No. 41 of 2004  (articles 58-60), provided that in such tax period the Substantial Activities requirements thereby stated are met.

The amendment to the last paragraph of point 5.1. relates to the situation in which, in some cases, due to the structure or nature of a given transaction, the executive or directive personnel may carry out activities connected to the main activities of the entity to which they belong, which may reduce the need of having a greater amount of full-time employees.

This Resolution also adopts the Single Guidelines Text for purposes of applying the substance requirements, as included in its Annex.

Board of Directors Resolution No. 006-2020 is effective October 1^st, 2020 (its signing date).